Why you should care

This little startup is taking on the TV behemoths to give Americans cheaper cable. And it all depends on a groundbreaking Supreme Court decision set for April.

By Randal C. Picker

The Daily DoseMAR 14 2014

If you’re old enough to remember having rabbit ears on your TV (which pulled in signals so you could watch for free), you might think antennas aren’t such a big deal. Video startup company Aereo agrees, and it’s been using an advanced version of the same technology to give its customers cheaper TV.

Not surprisingly, feathers are getting ruffled, and the opposing parties are taking their fight all the way to the Supreme Court on April 22. The court case could reshape the way you receive cable TV.

This is set to be one of the landmark cases of the year — and it’s not just a big deal for the nooks and crannies of copyright law, but also for what goes on right down in your own home. At stake? Lower cable bills; possibly also the future of TV in the long and short term, a programming could be “held hostage.”

Call this the next Napster.

So what exactly is Aereo?

It’s a throwback to the early days of cable. By today’s standards, it has relatively few channels — which are all delivered in an Internet framework. Aereo customers in New York City, for example, get roughly 35 channels, including the major over-the-air broadcasters and a smattering of others — but no ESPN, Disney, Bravo, etc. That may sound paltry, until you consider the price: $8 a month. This is bare-bones TV, but if you’re thinking about cutting the cable cord and rolling your own TV with a mix of Netflix, Amazon, YouTube and the rest, Aereo could save you money.

Source Getty

Like other service providers such as Uber and Airbnb, Aereo is trying to make money in the dark, unknown corners of the law — and, for Aereo, that law is copyright.

How does Aereo do it? With “farms” of thousands of miniature antennas. When you watch TV, Aereo assigns an antenna to you and delivers the content over the Internet. It happens through a tricky mix of Internet distribution and digital video recorders (DVRs). In Aereo’s view, this can all happen without having to pay to pluck the TV signals out of the air. After all, the company knows their customers could grab those signals for free themselves. All Aereo is doing is lending them the equivalent of very long cords and antennas. No surprise, the cable companies are crying foul — they pay broadcasters big bucks for all that content — and the over-the-air broadcasters are threatening to turn off their signals to force customers to pay for cable.

At the end of the day, every TV media company just wants to get paid for their content the way that ESPN, Disney and Bravo do.

Find customers, hope the legal system moves slowly, and create a critical mass of customers while the legal niceties get sorted out.

Aereo knew it would face litigation over its business model given the current U.S. copyright law. But startups are based on risk — and this one involves navigating the law: Find customers, hope the legal system moves slowly (it usually does) and create a critical mass of customers while the legal niceties get sorted out. For TV veterans, Aereo’s story is a rerun of the original fight that the early startups — cable TV companies — had with broadcasters back when cable was known as community access television. Back when cable companies were little more than very tall antennas and long wires that made it possible for remote viewers to watch stations they couldn’t access otherwise.

Aereo Antennas

The Supreme Court decided to allow cable to move forward free of copyright restrictions. The early cable cowboys had bet on copyright and won, putting them on the path that brought us Comcast and the like today.

Now Aereo is facing a similar bet-the-company decision in the Supreme Court. The question: How should we interpret the public performance right today?

At a time when Comcast is scooping up chunks of the TV industry faster than a Roomba, we should all be rooting for an outcome that disrupts the current landscape.

Aereo is fighting cases across the country as it tries to expand its service. It recently lost in a federal court in Utah, and its service has been turned off in Denver and Salt Lake City. Meanwhile, the U.S. Department of Justice filed a brief in the Supreme Court in favor of the broadcasters. The government wants to preserve the existing broadcasting and cable rules and yet still allow some version of the future to play out. So the government wants remote DVRs and cloud computing tech more generally — but not Aereo right now. That’s a pretty fuzzy line to draw.

At a time when Comcast is scooping up chunks of the TV industry faster than a roomba — buying NBC Universal and then floating a multibillion offer for Time Warner Cable — we should all be rooting for an outcome that wholly disrupts the current landscape.

Repurposing the TV spectrum is the big prize: Get rid of broadcast TV, and move that spectrum to more wireless data for our tablets, smartphones and whatever devices come next. And come they will. Here’s what the April 22 case will mean. Should Aereo lose, the cable and TV broadcast regime will remain unchanged. That means blood-pressure-raising, sky-high cable bills, and we would continue to fritter away valuable spectrum doing over-the-air broadcasting that no one is watching using their own antennas. An Aereo, however, win would disrupt today’s TV and cable distribution, and trigger a chain of events that might let us reclaim the TV spectrum. Broadcasters like CBS are threatening to shut down their broadcast signals if Aereo wins and switch over their own distribution to the Internet, a move the industry calls going “over the top” — and exactly why you want Aereo to win.

The history of cable TV is about the little guy kludging together antennas and wires to let viewers sit at home and watch more channels. Today, cable companies are the behemoths; Aereo is the upstart. A victory for the little guy would mean more, cheaper ways to watch TV today, and a step toward grabbing back the TV spectrum that we need for the mobile devices we’ll lust after 10 years from now.

Randal C. Picker is the James Parker Hall Distinguished Service Professor of Law at the University of Chicago Law School and a senior fellow in the Computation Institute of the University of Chicago and Argonne National Laboratory. Follow him on Twitter @randypicker.